US economy expands at a surprisingly strong 4.3% annual rate in the third quarter

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WASHINGTON (AP) — The U.S. economy expanded at a surprisingly strong 4.3% annual rate in the third quarter, the most rapid expansion in two years, as consumer and government spending, as well as exports, all grew.

U.S. gross domestic product from July through September — the economy’s total output of goods and services — rose from its 3.8% growth rate in the April-June quarter, the Commerce Department said Tuesday in a report delayed by the government shutdown. Analysts surveyed by the data firm FactSet forecast growth of 3% in the period.

However, inflation remains higher than the Federal Reserve would like. The Fed’s favored inflation gauge — called the personal consumption expenditures index, or PCE — climbed to a 2.8% annual pace last quarter, up from 2.1% in the second quarter.

Excluding volatile food and energy prices, so-called core PCE inflation was 2.9%, up from 2.6% in the April-June quarter.

Consumer spending, which accounts for about 70% of U.S. economic activity, rose to a 3.5% annual pace last quarter, up from 2.5% in the April-June period.

Consumption and investment by the government grew by 2.2% in the quarter after contracting 0.1% in the second quarter. The third quarter figure was boosted by increased expenditures at the state and local levels and federal government defense spending.

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